Stocks end lower, halting 3-day winning streak

Drug stocks punished for a second session amid worries about Democrats

By

LeslieWines

NEW YORK (MarketWatch) -- U.S. stocks closed lower Thursday, snapping a three-session winning streak, felled by weaker-than-expected consumer sentiment data, higher crude prices and worries about how pharmaceutical companies will fare under a Democratic party-dominated Congress.

The Dow Jones Industrial Average
DJIA, +0.08%
closed down 73.24 points at 12,103.30, with 22 of 30 components contributing to losses.

Within the Dow industrials, losers were led by drugmakers Merck
MRK, +0.54%
which closed down 3.3%, and Pfizer
PFE, +1.54%
which fell nearly 3%. Hewlett-Packard Corp
HPQ, -0.23%
tacked on 1.8% to lead the winners.

The S&P 500
SPX, +0.04%
slipped 7.39 points to 1,378.83, while the technology-rich Nasdaq Composite
$COMPX
gave up gains to close down 8.93 points at 2,376.01, after earlier trading as high as 2,401.33.

Thursday's lower prices followed a boisterous rally Wednesday that saw the Dow industrials end at a record after Democrats, who called for greater fiscal responsibility, took control of the House of Representatives for the first time in 12 years. See Market Snapshot.

"Today you're seeing the market react in another way to the shifting to a Democratically-controlled Congress," said Robert Pavlik, chief investment officer at Oaktree Asset Management.

"The reaction is steepest in the drug sector," due to concerns the Democrats may find new ways to regulate it, Pavlik said.

"In my opinion, the selling in the pharmaceutical sector is overdone, and some investment professionals may be waiting to step in and buy soon," he said.

However, Paul Nolte, director of investments at Hinsdale Associates, said "To me this is a very minor correction, after a pretty good run-up. All the excitement today is in the gold and oil markets."

On the data front, the U.S. Commerce Department said the trade deficit narrowed by 6.8% to $64.3 billion, which was the largest narrowing since December 2004, and slightly below the consensus forecast of a $66.3 billion deficit. See full story.

Other data reports pointed to economic weakness. The University of Michigan's consumer sentiment report fell to 92.3 this month from 93.6 in October. Economists polled by MarketWatch had expected a reading of 93.8. See full story.

Ian Shepherdson, chief U.S. economist at High Frequency Economics, said the report showed that "the boost to confidence from the plunge in gas prices is over."

The Commerce Department said wholesale inventories reached their highest level relative to sales in over a year. See full story.

In the broad market, there were 1.857 billion shares traded on the New York Stock Exchange, where declining stocks outnumbered advancing shares by 19 to 13. About 2.419 billion shares traded on the Nasdaq market, with almost 2 falling stocks for every 1 on the rise.

By sector, networkers
$NWX
got a lift from Cisco's results, and gold stocks
GOX, -0.56%
rallied along with the precious metal. Other sector gainers included computer hardware
$GHA
and oil services
OSX, +0.22%

Pharmaceutical stocks
$DRG
fell for a second day in a row on the concerns that the Democratic Party-controlled Congress could enact laws that might lead to lower drug prices.

Dollar pulls back, crude spikes

The U.S. dollar erased earlier gains against the yen to trade mostly lower against its major counterparts, on reports that China's top central banker said there were concrete plans to diversify its foreign-exchange reserves, which recently reached the $1 trillion mark. See full story.

Outside of currencies, other instruments China said it would use to diversify its reserves include oil and gold.

Crude oil for December delivery closed at a 2-week high, rising $1.33 to end at $61.16 a barrel, as natural-gas futures shot up nearly 4% on continued concerns over supply declines. See Futures Movers.

Gold futures rallied to a two-month high, in line with higher energy prices and concerns about the economy and dollar. The December gold contract closed up $18.50 at $636.80 an ounce, as they aimed to end a three-session losing streak. See full story.

The bond market seesawed around unchanged levels, after a muted reaction to the day's data stream. The 10-year Treasury note closed up just 1/32 at 101 28/32. The yield
TNX, -0.48%
was at 4.64%. See full story.

The results topped expectations, as did the company's fiscal second-quarter outlook, sending the stock up 6.3% to close at $26.69.

Shares of media giant Viacom
VIA
ended down 3.3% at $38.37. The company reported a 16% decline in third-quarter earnings, but the results topped analyst forecasts. The company also said its chief financial officer was resigning. See full story.

Dow component 3M Co.
MMM, +0.77%
said it would sell its global branded pharmaceutical business for a total of $2.1 billion. That stock lost early gains to finish down 52 cents at $78.90. Read more.

Hewlett-Packard
HPQ, -0.23%
also in the Dow, rose after Goldman Sachs raised its earnings estimates and price target for the stock, ahead of what was expected to be strong fiscal fourth-quarter results. The stock gained 1.8% to $39.56.

Another Dow component DuPont
DD, -4.11%
rose 1.7% to $47.25 after the company's executives at an analysts' meeting made positive comments about the seeds division.

Intraday Data provided by SIX Financial Information and subject to terms of use. Historical and current end-of-day data provided by SIX Financial Information. All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only. Intraday data delayed at least 15 minutes or per exchange requirements.